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Croatia Autos Report 2011
Business Monitor International, November 2010, Pages: 37
Croatia Autos Report provides industry professionals and strategists, corporate analysts, auto associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Croatia's automotive industry.
Croatia’s new passenger car sales plunged 49% y-o-y in 2009, to less than 45,000 units, down from close to 88,000 in 2008. The market was hit hard by a recession in the wider economy, which contracted in real terms by just over 5% across 2009, after moderate growth of 2.3% in 2008. The recession impacted on consumer demand particularly hard, against a backdrop where car sales, like other big-ticket consumer items, are always highly vulnerable to cyclical economic shocks. As the economic gloom deepened, banks became increasingly risk averse, so even those consumers brave enough to seek credit to part-fund new purchases, often found that they were not able to secure such credit.
The performance so far in 2010 has not been a great deal better. In the first eight months of the year, sales of new passenger cars fell by a further 19.6% year-on-year (y-o-y), to 26,064 units. In the first six months of the year, consumer demand remained the weakest key sector of Croatia's economy, which consequently remained mired in recession, despite positive export growth. However, there are signs that the slump in household consumption – and with it, new car sales – has finally begun to bottom out. The contraction in overall household spending eased from 4.1% in the first quarter of the year, to 2.5% in the second quarter. In August 2010 (traditionally always a slow month for vehicle purchases), sales of new passenger cars rose in y-o-y terms by 9.5%, to 2,663 units, according to Poslovni.hr. While this monthly number for car sales, taken by itself, should be viewed with caution (especially given the historical thinness of the market in August), the apparent bottoming out of consumer demand signalled by the Q210 household spending figures should inspire hope that the car market will begin to pull itself out of the doldrums.
For 2010 as a whole, we forecast that sales of new passenger cars will register just over 42,000 units, a further fall of around 6% from the sales level recorded in 2009. The sales in the first eight months of the year, if replicated across the whole year, would result in total sales of new passenger cars of only 39,000. However, we expect an additional 3,000 units will be sold over the last four months of the year, with the approach of Christmas providing at least a temporary fillip.
Moving further forward, while we expect that growth in both the economy as a whole and household consumption will be positive in 2011, the recovery of the latter will continue to lag. Indeed, next year is likely to see exports continue to lead the recovery, which will be constrained by a very anaemic and patchy upturn in domestic demand, according to our macroeconomic desk. As a result, the recovery in car sales is unlikely to be spectacular, despite the very low base levels created by the dreadful 2009 and 2010 sales figures. For 2011 as a whole, we now predict that sales of new passenger cars will reach 44,200 units, a rise of 5% y-o-y. The recovery should then gather a degree of pace in 2012, at least in percentage terms, with a rise of 10% y-o-y. However, in absolute terms, this still only results in an annual sales figure of just below 49,000 new passenger cars for 2012. Overall, domestic demand – and, in turn, car sales – is likely to remain sluggish for some time, due to the need of both the banking sector and households to consolidate their accounts, after the credit-fuelled spending of the years up to 2008. Since Croatia is an import-driven auto market – with no significant production activity – we anticipate that trends in imports of new vehicles will largely mirror domestic sales over our forecast period. That is only likely to change in the event of a major carmaker taking a decision to establish a production/assembly facility in the country.
Overall risks to Croatia’s auto market forecasts are finally poised. Given reasonable stability in the local political environment (and our already bearish core scenario for consumer demand), the main negative risks are external economic shocks. A double-dip global downturn, which could be triggered by any number of factors, including a dip in Chinese domestic demand, intensified focus on the fiscal credibility of eurozone nations, or a failure of the US private sector to register a sustainable revival – could clearly result in car sales in Croatia enduring negative real growth considerably beyond the end of 2010. In terms of the main upside risk, the global economy (and in particular, the eurozone) may recover more robustly than we currently anticipate, leading to much higher Croatian exports than currently forecast, revived local business investment, higher disposable incomes and a sharper-than-anticipated revival of new car sales.
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